Canada second quarter household debt-to-income ratio rises to record

by MBN11 Sep 2015

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Canada second quarter household debt-to-income ratio rises to record

OTTAWA (Reuters) - Canada's household debt-to-income ratio rose to a record level in the second quarter as disposable income increased at a slower pace than household credit market debt, data from Statistics Canada showed on Friday.

The leverage ratio rose to 164.6 percent in the second quarter from 163.0 percent in the first quarter. The ratio is not seasonally adjusted.

The Bank of Canada watches the measure for signs consumers may be overextended after years of low interest rates have boosted consumer and housing market activity.

Two cuts by the central bank this year that have brought the benchmark rate down to 0.5 percent have raised concerns Canadians might be spurred to take on more debt than they can handle.

On a seasonally adjusted basis, households borrowed C$26.3 billion ($19.85 billion) in the second quarter, an increase of C$3.7 billion from the previous quarter. Mortgages accounted for the largest portion of that at C$17.7 billion.

The household debt service ratio, which is the measure of obligated payments of principal and interest as a proportion of disposable income, rose to 14.1 percent, above the historical average of 12.4 percent going back to 1990.

But the interest-only debt service ratio remained at historic lows at 6.3 percent.

Dept going up. What's new! Absolutely nothing. Let me give you the future news and that is, it's going to get even way much higher.

The economy not just here but globally is about to cave in. The wealth factor is hugely all one sided now. To few people with way to much wealth and the other side of the coin that being the masses of other people have very little. One answer is become a politician and you will be set for life and never have to worry about money ever in your life time. There is one option for all to consider. That to is reality.

Agreed John, the reset is coming...inflation is crazily underestimated (2.1% approx.). I don't know where they get 2.1% when 30% of the equation is housing. My house 'went up' by 35% in the last year and my grocery bill has gone up at least that...not to mention if a person went to a dinner and a movie, maybe that's why the debt is going up because people have to take out a loan to go out for dinner and movie.

I wish people understood what effect lowering interest rates had on their purchasing power. Hopefully people will wake up and smell the coffee soon!